Historically, hard economic times drive consumers to seek ways of saving money, resulting in a boom of coupon clipping. But, the long-term declines in the redemption of Free Standing Insert (FSI) coupons have been puzzling, and perhaps have more to do with the way the FSI providers and brands are marketing their own product than the consumer’s desire to save money.

FSI coupons continue to be very popular with consumers. They drive mass awareness at a low cost, can potentially increase retail trade merchandising, move significant volume, and provide space to convey to a consumer the benefit of the marketed product. For many brands, this is their only form of broad reach advertising. They also serve as a way to bring a campaign approach to the creative, tying in with advertising, trade programs, and other marketing vehicles. SmartSource and RedPlum have specific retailer programs that link the coupon to an advertised instore sale on an adjacent page to spell out the consumer savings. These programs can sometimes receive excellent trade merchandising support.

FSI coupon distribution accounts for 90% of all coupons circulated and dwarfs digital coupon prints/loaded, which stands at 2%. According to Inmar, total coupons distributed were basically flat in 2015; however, coupons redeemed were down 13%. The average FSI redemption rate was .39% in 2015, and continues to decline year after year. Granted, with the advent of digital promotions, everything might be becoming more targeted -that also means the ability to measure the results in near real-time. However, one of the main benefits of the FSI is to drive mass awareness and create a trial for new products, something that digital cannot do with any scale. Retailers want brands to grow the category and bring in new users, or have current users pantry-load, which the FSI still can do quite well. Retailers also want to see successful turns of new products within 90 days.

The current newspaper circulations are nearing 70 million; these includes many newspapers that brands would opt not to include in their distribution, but are required to buy as part of a newspaper “form” for a given market. There is some flexibility to break forms, but usually at an additional cost. It is like the 80/20 rule; eighty percent of business comes from 20% of customers. It also appears that coupon booklets are getting smaller and the paper quality appears to be of lesser quality than once was. This all impacts the overall feel and quality of the FSI insert. Better quality paper means cleaner, clearer images, brighter color and cleaner text.

Food brands, which have lower price points than non-food items, are seeing the “cost per unit moved” for FSI’s growing, meaning the return on investment is being scrutinized by marketers who place FSIs. In fact, the latest trends from Kantar Media, which tracks FSI and digital coupons, indicate food companies are using more digital incentives at the expense of the FSI. This is partly being driven by grocery chains wanting brands to participate in their digital programs. However, the advertising benefit of digital to build a brand’s equity is lacking in many respects.

Additionally, the growth of private label in many food categories might be affecting FSI coupon performance. Along with providing consumers with more private label items in many fast-moving categories, the product quality has also improved. Consumers who use coupons are generally pre-disposed to deals, looking for ways to save money, which is putting added pressure on branded items. The coupon value should take into account key price points of private label, including branded competitors, to ensure the incentive is adequate to meet brand objectives.

A little known study and a series of whitepapers authored by Phil Sawyer of Roper-Starch (now part of GfK) provided nine key principles for developing great FSI creative which can significantly enhance the performance and communication of the product benefit:

1. Keep it Simple

Free of clutter

Deliver quick understandable message

Get across a single point; reader gets in and out quickly

2. Appeal to Appetite

Mouthwatering food consistently outperforms solo package shot

3. Optimize use of color

Strong color contrast

Dark background creates 3D impression

Color contrast creates drama

4. Use good flow

Move eye to key copy

5. Employ Gigantism

Large images engage readers

6. Highlight Product Benefit

Answer “what’s in it for the consumer”

7. Use Human Models Purposefully

Engage consumers in meaningful activities

8. Use photography over illustration

Boldness & clarity drive attention

Reality convinces better

9. Take a campaign approach

Reinforce advertising

Unified look and feel

The FSI providers are in a quandary. Do they continue to damage the efficacy of their own product, or will they invest to improve the overall performance and quality of what they are marketing? Perhaps they should look at P&G’s brandSAVER coupon booklet for some answers. From a production standpoint, it is clean, uses high quality paper, and is large in size. From a brand standpoint, it is easy to read, conveys premium with the paper stock quality, includes great creative, offers clear and compelling coupon values, and the consumer benefit is unmistakable.

There are several factors that favor the long-term viability of the FSI. In addition to the key benefits of FSIs included in the second paragraph, a major competitor of the FSI, digital coupons, is not evolving as many marketers once thought, with lower ROI’s and its inability to move significant volume. And, in 2017, the Affordable Care Act will see premiums increase as much at 115% in some states, driving many, budget conscious consumers to look for ways to save money. Another major factor is that soon, critical government programs, such as Social Security and Medicare, may run out of money. If this happens, you can expect the FSI to be in high demand by the millions of Americans that will look for ways to save money.

Perhaps the FSI providers will get creative in their marketing tactics for their own product and figure a way to bridge the generational gap between current users and the younger generation made up of millennials and gen x’ers who prefer all things digital. A recent WSJ article, “Grocers Feel Chill from Millennials,” states, “Grocers are struggling to lure e-commerce-loving millennials into their aisles.”

The article further states, “They are spreading purchases across new options, including online grocery services such as AmazonFresh, beefed-up convenience stores and stronger food offerings from omnibus retailers like Wal-Mart Stores Inc. and Target Corp.”

One thought is to tap in to Social Media Influencers. According to a recent 60 Minutes report, “There is a new trend in advertising that might surprise you...It’s exploding on mobile devices, set off by young people -- most in their twenties -- who have attracted large numbers of followers on social networks -- platforms like Facebook, Twitter and Snapchat. They’re called social media influencers. And some of them have larger followings than the most popular movies or TV shows”.

Making the FSI popular and creating more awareness with millennials would certainly tap into a huge opportunity for FSI providers, retailers, and brands. At some point, the millenials will start having families of their own, and spend more time in supermarkets. Having a Social Media Influencer make the FSI cool may be one way to help create awareness for the millennials, and get them familiar with the FSI insert when they start having families of their own.

About the Author Andy "Dewey" Rumpelt:

Andy "Dewey" Rumpelt has spent 25 years in CPG and is considered an expert on trade, consumer and media insights. Andy started his career at American Home Foods in field sales progressing to brand management on many brands in which trade promotion was a crucial aspect of marketing activities. Andy also worked for ACNielsen. Most recently Andy was Vice President at Kantar Media/Marx, where he provided key insights on consumer FSI, digital, and advertising insights for some of the largest CPG companies in the country. Andy is currently the owner of PRICE-TRAK.